Title: "Public Trust Betrayed: The Truth Behind the Real Estate Appraisal Industry"
Author: James E. Manning
Publisher: Tate Publishing, 2011
Since the inflated housing market fizzled flat a few years ago, enough real estate expose books have been published to fill, well, a house. We’ve seen insider revelations from the perspective of mortgage lenders and brokers. We’ve read accounts of Wall Street mortgage securitization dissected and discussed in stomach-churning detail.
I have personally read at least three books written by consumers who bought, sold or financed (and refinanced, and refinanced) homes during the last decade’s heady housing market.
But who haven’t we seen or heard from?
Appraisers — who are alternatively the most or the least culpable of all these market participants for the housing market’s crash (depending on who you’re talking to at any given moment).
And, from my vantage point, appraisers are in a tough spot — making their perspective on the bubble particularly intriguing. They were widely blamed for blowing the bubble up by appraising homes at ever-higher prices, and by allowing buyers to continually pay more, sellers to continually charge more, and lenders to have the imprimatur of legitimacy and the ability to sell the mortgages they originated, as they financed homes at skyrocketing prices.
But post-crash, after a literal 180-degree reversal of course in terms of how conservative they are with respect to the fair market values they assign to homes, appraisers still take a lot of heat for blowing lots of deals where the buyer and seller have agreed on a sale price.
Simultaneously speaking from the appraiser’s viewpoint and exposing the appraisal ills that at least partially birthed the nation’s foreclosure crisis comes James Manning, with more than three decades as a residential real estate appraiser, and his new book, "Public Trust Betrayed: The Truth Behind the Real Estate Appraisal Industry."
The book starts out on a sour-grapes note: Manning bemoans the current state of the housing market, decries the decline in both the quality of appraisals and the fees appraisers earn as a result of the widely unpopular Housing Valuation Code of Conduct (a post-bubble set of regulations that shifted the power to order appraisals from loan brokers to "neutral" third-party appraisal management companies), and points out that the decrease in appraiser income is likely to snowball into even more negative impacts on the market, rather than improving it.
Who’s to blame? Manning spreads a wide layer of responsibility for the crisis, from Wall Street bankers and credit rating analysts, to the real estate and loan brokers, to Main Street real estate consumers.
Along with all this concern, though, Manning attaches a healthy dose of education about how appraisers, who Manning describes as "the only parties to the transaction who are supposed to be unbiased and objective," work and get paid — both now and before the bubble.
From there, the book takes the format of a very loose memoir of Manning’s years as an appraiser, including his experiences as an appraiser for the now-infamous (and now-defunct) World Savings, interspersed with massive doses of market history and criticisms/explanations of mortgage industry fraud and abuse, sometimes from Manning’s perspective having witnessed or suspected it himself, and other times just explaining how systemic abuses came to pass with the benefit of his insider knowledge.
Unfortunately, the book does not unfold in chronological, or even logical, order. Instead, it sort of hops around from subject to subject, episode to episode, and rant to (often illuminating) rant.
From a discussion of the "easy money" policies of the subprime era, the book hops on to how the new appraisal regulations are threatening to run experienced appraisers out of the profession, then talks about some of the individual personalities who play roles in real estate transactions and the mortgage industry before covering the savings-and-loan crisis.
Some of these chapters contain only a single anecdote, while others offer more comprehensive proposals or critiques. As a result, the book is somewhat tough to follow, and seems more like a collection of essays or commentaries than a cogent case for or against, well, anything.
If you have a specific interest in how appraisers work and the vast influence they have on the housing market, historically and now, the book sheds lots of light on these subjects, and also surfaces some egregious appraisal and mortgage industry abuses.
But it’s not exactly the manifesto of "the truth behind the appraisal industry" that it could be, mostly due to its organizational peccadilloes.